CB and a policy: all bets are off

BOJ will continue to increase a monetary base, while don`t stabilize inflation higher than 2%

The storm didn't happen again: Kuroda persuades and promises, Yellen continues to hope and to reassure. The market against the background of the weak statistics digests decisions of FRS and BOJ, trying to find in them a point of support and the direction of further movement.

Data of the Japanese import/export for August disappointed again, and foreign trade deficit of Japan appeared on the level of ¥18.7 billion whereas economists expected ¥200.02 billion positive balance. On this background, the Bank of Japan left a deposit rate at the level of -0.1%, ¥80 trillion a year for the purchase of the government bonds and target purchasing amount of ETF in ¥6 trillion a year, but risked to change the structure of price policy.

BOJ will continue to increase a monetary base, while don`t stabilize inflation higher than 2%, in this regard the monetary base in Japan can grow to 100% of nominal GDP less, than in a year. Some analysts consider that the regulator instruments of impact come to an end therefore it avoids the target expansion of a monetary base to targeting of profitability of state bonds (JGB). It is supposed to change the amounts of purchases of JGB to keep profitability of 10-year papers about zero.

At last FRS corrected (once again) the number of the expected increases in a rate this year from two to one and predicted less aggressive growth of an interest rate for the next two years. As expected, the rate was left without changes again, and the bases for increase in December will look for in the distressful labor market again. The moderate and weak GDP growth, weak growth of inflation and the excellent level of unemployment pull out of a hat are expected again, and 180 thousand new workplaces every month are perceived as «critically insufficiently». Economy estimates aren't updated - Yellen traditionally called growth «moderate», but if the flow of weak data of the USA doesn't stop, then the probability of an increase in the current year will become a minimum.

Unlikely the present situation can be considered as the beginning of medium-term dollar downing, though the moment, in principle, favorable: the treasury saved up on the accounts in FRS $364 billion, that is so far the inventory in case of reducing demand for a national debt because of dollar downing. Correction of rates in November is improbable at least because the meeting will take place all some days before the presidential elections. And this choice will also influence the decision of the American Central Bank.

Further expansion of the euroQE can be problematic - some lawsuits have filed concerning actions of the ECB for an occasion of increase in purchasing amount of bonds up to €80 billion a month. According to Reuters, the German savings and land banks counted that the annual damage from negative rates of the ECB from the moment of the beginning of QE, at least, is €500 million. And the further QE expansion will only increase the chances of success of such claimants as continuation of mitigation will lead to redistribution of a default risk of the Eurozone countries that is contrary to the legislation of the leading countries of the union.

Assets within QE shall correspond to certain conditions to avoid losses from the ECB, at the same time, if the ECB holds more than 50% of a national debt of the country, then there will be enough its decision for the announcement of a default of all states or blocking of any other measures. As a result of expansion of a range of assets which are allowed to be purchased within the program now, there is a deficit of bonds of high-quality borrowers, that initially contradicts rules about a prohibition of the emission financing of the ECB. It`s already the third attempt of judicial claims to Eurobank (two first ended with failure) and in this case the Constitutional court of Germany didn't announce the verdict yet.

GBP/USD put in corrections the most part of the last week, having slightly decreased only in the last trading session on careless comments of Johnson. Devaluation gradually affects import volumes. Since the Brexit the pound fell in price by 15%, that has attracted an additional flow of tourists to Britain and positively affected the dynamics of the shares FTSE 100, due to the fact that 75% of the companies, entering this index, the most part of a revenue is received out of the country. As a result - the British macrostatistics improves, and the pound, naturally, is stabilized.

While it is difficult to tell how long will be this positive effect, but the oil and other raw assets (estimated at $USA), become more and more expensive to British, that will inevitably lead to inflation growth. It will lower trust to the economy and will force business to refuse investments, especially, if during negotiations on Brexit there are to arise complications.

At the summit of EU countries (without Great Britain) the countries agreed about «the Bratislava road map» concerning migration, safety and economic development. The next attempts of Great Britain to keep access to the single market and at the same time to limit migration remain ineffective and even caused sharp reaction of the Bratislava group countries which threatened with veto use if a labor migration to their citizens will be limited.

The German officials at last began to worry (and to count financial reserves) in connection with the requirement of the USA for payment of $14 billion from Deutsche Bank, which suffered from the policy of negative interest rates of the ECB and legal costs because of various legal violations. But there are no public discussions of this problem - Merkel`s government supports the silence mode, that only strengthens apprehensions concerning viability of the bank. Earlier for similar violations already paid with Bank of America - $17 billion and JP Morgan - $13 billion. The American Ministry of Justice also leads investigations concerning other European Banks: Barclays, Credit Suisse, UBS and RBS. By itself if in a situation with DB it`s necessary to pay, then and to others indulgences won't be done. A total amount which can be required on salvation of the EU banks can exceed twice the size of their equity in the ECB.

In three days after the FRS meeting the calm in the market continues and is already unclear, what are information occasions still necessary to begin moving more actively. Especially as no significant events current week are expected. On Monday televised debates of U.S. presidential candidates can press slightly for dollar, but in general the market shall be quiet and technical, we follow with the current statistics. On Wednesday it`s worth listening to Draghi - he is simply have to comment on events of the last week, and Yellen with the next portion of a sedative will appear on Thursday after closing of the American market.

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